UC-NRLF 


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GIFT   OF 


The  Manufacturer's 
Wage  Problem 


•By 

Herbert  F.  Perkins 

/  f 

of  the 
International  Harvester  Co. 


THE  UNION  LEAGUE  CLUB 
OF  CHICAGO 

1919 

After  you  have  read  this  pamphlet  please  pass  it  on  in  order  that  the  message  it 
carries  may  reach  the  largest  number  of  persons. 


Mr.  Herbert  F.  Perkins  has  been  ac- 
tively engaged  in  manufacturing  in- 
dustries since  his  college  days — first 
with  the  National  Malleable  Castings 
Co.,  and  subsequently,  since  1899,  with 
the  McCormick  Co.  and  the  Interna- 
tional Harvester  Co.,  in  which  latter 
company  he  holds  the  position  of  Divi- 
sion Manager,  in  charge  of  manufac- 
turing. 

From  the  latter  part  of  May  to  the 
end  of  December,  1918,  Mr.  Perkins 
was  attached  to  the  War  Policies  Board 
in  Washington,  D.  C.,  under  the  De- 
partment of  Labor,  as  Business  Ad- 
viser to  the  Chairman,  Mr.  Frankfurter. 
In  this  position  Mr.  Perkins  had  ex- 
ceptional opportunity  to  see  the  whole 
situation  in  its  true  perspective. 


Copies  may  be  obtained  of  the 

War  Committee  of  the  Union  League  Club  of  Chicago 
at  the  following  prices,  delivery  prepaid: 

Single  copies .___$  0.05 

One  hundred  copies      ------        2.00 

One  thousand  copies      ------      10.00 


The  Manufacturer's  Wage 
Problem 


THE  manufacturer  of  the  United  States  is  emerging  from 
a  period  of  intensive  effort,  accompanied  by  a  con- 
stantly increasing  cost  of  production,  due  to  mounting 
material  prices  and  labor  rates.  Higher  cost  of  production, 
translated  into  commodity  prices,  has  immediately  been  re- 
flected in  the  living  cost  of  the  wage-earning  classes. 

It  is  evident  that,  in  proportion  as  living  costs  have  ad- 
vanced without  a  corresponding  advance  in  the  standard  of 
living,  increased  wages  have  been  purely  an  increase  in 
dollar  wages,  but  not  in  actual  prosperity. 

Owing  to  the  tremendous  demands  for  food  abroad,  that 
part  of  the  working  man's  cost  of  living  which  is  made  up  of 
his  food  supplies,  has  advanced  perhaps  more  rapidly  than 
other  items  which  directly  affect  him.  Investigation  has 
shown  that  for  the  working  man's  family,  food  constitutes 
from  forty  to  fifty  per  cent  of  the  family  budget  and  that  for 
the  lower  paid  workman,  the  proportion  borne  by  food  has 
been  higher  than  for  the  highly  paid. 

With  the  advancing  cost  of  conducting  business,  the 
manufacturer  has  suffered  an  increasing  strain  upon  his  cap- 
ital resources  and  has  been  compelled  to  increase  his  selling 
price  to  protect  his  advancing  capital  requirements. 

The  burden  of  government  income  tax  and  in  less  degree 
other  taxes  has  developed  through  the  exigency  of  war  to 
undreamed  of  figures.  In  order  to  provide  the  annual  cash 
outlay  to  meet  these  taxes  and  at  the  same  time  maintain 
normal  net  earnings,  selling  prices  have  had  to  be  still  further 
increased. 

Employer  and  Employe  Alike  Loyal. 

During  this  period  the  patriotic  enthusiasm  of  the  citi- 
zenship of  the  country,  both  employer  and  employe,  has  run 
high.  Resources  of  capital  and  labor  have  been  freely  placed 
at  the  command  of  the  government  to  prosecute  a  successful 


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war  and  to  maintain  at  the  highest  standard  the  world  has 
known  the  conditions  to  be  thrown  around  our  armies  in  the 
field  and  in  training  in  the  cantonments  at  home. 

This  is  no  time  to  dissect  the  various  degrees  of  self- 
interest  or  national  loyalty  which  have  influenced  either  the 
employer  or  the  employe.  There  has  been  profiteering  in 
both  classes  to  the  everlasting  disgrace  of  the  individuals 
justly  so  charged,  but  it  would  be  unjust  to  the  spirit  of  the 
whole  population  that  has  been  shown  during  the  war  to 
indulge  in  implications  against  either  the  employer  or  the 
employe. 

Period  of  Uncertainty  Ahead. 

Today  the  manufacturer  of  the  United  States  faces  a 
serious  and  uncertain  future.  He  knows  that  for  a  year  and 
a  half  to  come  the  price  of  wheat  has  been  guaranteed  at  the 
highest  war  price.  He  understands  that  his  country,  owing 
to  the  demoralized  condition  in  other  great  food  producing 
nations,  is  expected  to  protect  food  shortage  in  Europe  and 
he  therefore  has  reason  to  expect  that  foodstuffs  generally 
will  be  in  unprecedented  demand,  so  that  although  the  food 
requirements  of  armies  is  materially  greater  than  the  food 
requirements  of  the  same  population  when  returned  to  civil 
life,  the  cost  of  food  in  the  workman's  budget  will  continue 
at  a  high  level  for  an  extended  period. 

The  still  incomplete  lists  of  our  own  losses  in  the  war 
from  death  by  battle  and  sickness  and  from  crippling  wounds 
evidence  the  dreadful  disaster  to  the  young  manhood  of  our 
country  that  the  fight  for  world-wide  democracy  has  cost. 
Yet  we  know  how  small  is  our  own  disaster  compared  with 
the  appalling  loss  to  the  fighting  forces  of  our  allies  and  of 
the  enemy.  The  depletion  of  able-bodied  men  in  those 
countries,  the  lower  birth  rate  incident  to  the  strain  of  the 
contest  and  the  consequent  decline  in  conditions  of  living  are 
bound  to  be  factors  of  great  importance  in  limiting  labor 
available  for  the  period  of  reorganization  in  Continental 
Europe  and  in  the  colonies  related  to  the  European  nations 
that  have  engaged  in  the  four  years'  conflict.  There  is  bound 
to  be,  from  purely  physical  causes,  a  shortage  of  man  power 
in  these  countries. 

On  the  other  hand,  we  know  that  with  the  great  burden 
of  debt  which  the  war  has  laid  upon  the  contesting  nations, 


their  only  salvation  lies  through  intense  labor  and  increased 
production  and  a  consequent  struggle  for  the  trade  of  the 
world. 

The  unprecedented  requirements  of  the  allied  nations 
have  stimulated  the  spirit  of  invention,  have  broken  down 
many  of  the  impediments  to  production  and  stimulated  the 
use  of  machinery  and  means  of  production  along  American 
methods,  so  that  the  manufacturing  production  per  man  in 
the  allied  countries,  particularly  England,  has  been  heavily 
increased.  It  follows  that  the  advantage  which,  through  our 
manufacturing  skill,  we  undoubtedly  possessed  in  the  period 
preceding  the  war,  has  been  decreased.  As  an  instance  it  has 
been  reported  that  in  the  making  of  ammunition,  the  pro- 
duction per  man  in  English  arsenals,  which  before  war  was 
markedly  less  than  in  the  American  shops,  had  toward  the 
end  of  the  period  of  the  war  surpassed  our  own.  Further,  it 
would  appear  that,  whatever  problems  the  reconstruction 
period  may  bring,  the  relations  between  the  wage-earners 
and  management  and  the  breadth  of  vision  with  which  these 
groups  have  been  approaching  their  mutual  problems,  have 
been  vastly  improved  in  England  as  compared  with  the  pre- 
war period. 

Men  Return  as  Contracts  Cease. 

Now  the  war  is  over.  Our  men  from' the  camps  and  our 
men  from  the  ranks  abroad  are  returning  to  the  farms,  the 
offices  and  the  factories.  Our  great  organizations  built  solely 
for  the  production  of  war  requirements  are  emptying  their 
thousands  upon  the  labor  market.  Hundreds  of  establish- 
ments, large  and  small,  that  had  increased  or  modified  their 
facilities  to  meet  the  special  requirements  of  warfare,  not 
only  for  our  own  soldiery  during  the  last  year  and  a  half, 
but  also  for  the  soldiery  of  the  allies  for  the  past  four  years, 
are,  simultaneously  with  the  return  of  these  millions  of  men, 
having  their  contracts  cancelled. 

The  problem  of  industry  is  now  to  reorganize  the  imple- 
ments of  manufacture  to  meet  the  demands  of  peace,  to  find 
work  for  the  returning  khaki-clad  thousands,  and,  most 
fundamentally  of  all,  to  find  the  markets  which  shall  take 
the  product  of  these  facilities  and  of  these  men,  and  in  addi- 


tion  of  those  men  and  women,  who,  as  soldiers  of  industry, 
have  just  as  truly  been  prosecuting  the  war  at  home  by  the 
contribution  of  their  united  efforts  in  the  production  of 
munitions,  clothing  and  food.  He  would  indeed  be  more 
than  a  man  who  could  measure  the  problem  and  fit  its 
answer  and  the  man  would  be  fool-hardy  who  would  attempt 
the  functions  of  a  prophet. 

The  problem  of  immigration  and  of  emigration  will  be 
a  factor  of  no  little  importance  in  the  final  tale,  but  this  is  so 
insoluble  a  question  at  present  that  it  can  only  be  sug- 
gested, not  answered.  It  would  appear,  however,  as  more 
than  a  mere  probability  that  the  period  of  inflation  and 
apparent  great  prosperity  which  this  country  has  been  going 
through,  must  be  succeeded  by  deflation  and  a  time,  perhaps 
measured  by  months  rather  than  years,  of  pronounced  de- 
cline in  volume  of  business.  After  this  period  has  passed 
we  may  hope  that,  partly  in  consequence  of  the  great  de- 
struction of  material  things  which  the  war  has  entailed, 
there  will  follow  a  period  of  tremendous  production  of 
essentials  and  of  great  general  prosperity  for  America. 

Immediate  Decline  in  Wages  Undesirable. 

Perhaps  one  of  the  most  vital  problems  will  turn  upon 
the  distribution  which  shall  be  given  to  the  values  that  are 
to  be  created.  Are  they  to  be  apportioned  as  heretofore  or 
are  they  to  be  differently  distributed?  Too  many  employers, 
with  their  minds  more  on  the  experience  of  the  past  than 
the  promise  of  the  future,  have  been  watching  anxiously 
and  often  nervously  the  constant  rise  in  money  wages.  The 
thought  has  been  borne  strongly  in  upon  them  that  the  his- 
torical and  therefore  the  most  natural  and  correct  method  of 
meeting  the  period  of  declining  business  and  profits  is 
through  the  prompt  reduction  of  the  wage  rate  attained 
through  the  stimulation  of  these  past  years  of  conflict.  It 
does  not  seem  possible,  however,  that  such  a  thought  can 
be  the  proper  immediate  reaction  of  peace  to  the  spirit 
which  impelled  the  United  States  to  take  up  arms  in  the 
fight  against  the  Central  Powers.  Surely  none  of  us  whose 
minds  have  accompanied  our  hearts  in  determining  our 
relation  to  the  great  struggle  can  dismiss  the  conviction  that 
the  democracy  for  which  we  have  battled  is  not  democracy 


of  the  ballot  alone,  but  democracy  in  all  fundamental  rela- 
tions, including  those  that  are  industrial  as  well  as  those 
that  are  political.  We  have  struggled  for  a  democracy,  not 
Utopian  or  unguarded,  but  controlled  by  law  and  recognizing 
efforts  and  purposes,  intelligence  and  capacity,  a  democracy 
using  law  to  bring  to  the  less  gifted  or  less  fortunate  higher 
ambitions  and  growing  efficiency. 

Nor  is  it  unreasonable  to  believe  that  along  this  line  may 
be  found  the  most  genuine  and  most  broad  prosperity  of  all 
groups. 

A  study  of  the  figures  of  the  income  of  our  nation  for  a 
long  period  preceding  the  war  will  reveal  the  fact  that,  in 
the  years  of  relatively  lowest  domestic  consumption,  the 
ratio  of  our  income  from  sales  outside  of  our  country  to  the 
income  from  business  within  our  country  was  approximately 
as  one  to  five,  while  in  years  of  active  home  trade  the  ratio 
has  been  from  one  to  ten,  to  one  to  seven. 

Home  Markets  Most  Important. 

There  are,  in  the  United  States,  more  than  thirty  million 
people  largely  dependent  upon  fixed  compensation;  and  of 
these  the  wage-earners  in  our  factories,  offices,  mills  and 
mines  are  the  largest  single  group.  It  would  follow  that  the 
prosperity  of  our  home  market  and  consequently  the  pros- 
perity of  the  manufacturers  of  America  depends  upon  the 
buying  capacity  of  the  wage-earners  of  this  country  in  a 
degree  that  we  have  not  been  wont  to  measure  adequately. 

So  it  is  hard  to  believe  that  in  moments  of  sober  reflec- 
tion the  manufacturer  of  America  will  begrudge  for  the 
wage-earners  of  America  the  considerable  gain  that  has  ac- 
crued to  at  least  a  very  large  number  of  them  and  their 
families  through  their  increased  income  above  the  actual 
advance  in  cost  of  living  during  the  period  of  the  war. 

Freak  wages  growing  out  of  careless  setting  of  high 
piece  rates  in  cost-plus  war  work  and  other  such  absurdities 
or  blunders,  to  apply  no  worse  names,  will,  of  course,  not 
stand  the  light  of  common  sense  business  and  will  have  to 
go;  and  the  men  who  have  been  the  lucky  recipients  in  the 
past,  while  quite  humanly  protesting,  will  accept  the  neces- 
sary situation  much  as  a  lucky  business  man  would  say 


good  bye  to  a  passing  shower  of  profit.    Wage-earners  are 
human  and  humanly  sensible. 

May  Hold  Share  of  World  Trade. 

It  may  be  quite  possible  by  ingenuity,  invention  and 
management,  through  the  stimulation  to  individual  produc- 
tion that  naturally  accompanies  a  period  of  depressed  in- 
dustry, and,  most  important  because  as  yet  quite  unmeas- 
ured, through  a  careful  study  of  the  possibilities  of  improved 
industrial  relations  between  management  and  men,  that  we 
may  hold  our  share  of  the  world's  trade.  It  is  hard  to  de- 
termine what  is  any  nation's  just  share.  Perhaps  it  is  all 
that  it  can  fairly  get,  but  we  surely  may  assume  that  in  the 
long  run  we  cannot  afford  to  struggle  for  trade  at  the  expense 
of  the  physical  and  moral  and  social  development  of  any 
group  of  our  population.  We  know  that  as  citizens  of  a 
nation  we  love  and  wish  to  make  greater  and  more  powerful 
in  all  good  lines,  industrial  managers  will  unselfishly  de- 
termine, and  as  shrewd  business  men  in  all  honorable  and 
far-seeing  self-interest  will  unite,  to  promote  the  upgrading 
of  those,  who  through  lack  of  training,  or  opportunity,  or 
native  ability  or  because  of  improper  economic  methods, 
have  lived  under  inadequate  standards.  If  need  be  the  op- 
portunities of  the  future  must  now  as  always,  with  far-see- 
ing men,  warrant  temporary  and  immediate  sacrifice. 

Food  Must  Decline  Before  Wages. 

When  the  prices  of  foodstuffs  shall  have  fallen  by  the 
removal  of  artificial  props  and  through  the  returned  pro- 
ductivity of  various  lands  at  present  either  wasted  by  war 
or  handicapped  through  shortage  of  laborers  or  through 
unwillingness  to  toil;  when  abnormal  profits  and  wasteful 
methods  incident  to  the  period  of  the  war  have  been  elim- 
inated; and  when,  through  a  closer  co-operation  between 
management  and  wage-earners,  the  possibilities  of  increased 
production  have  been  secured,  the  elements  that  go  to  make 
the  wage-earner's  budget  will  show  an  appreciable  decrease. 
Then — and  not  until  then — regulated  by  the  maintenance 
of  general  and  not  class  prosperity,  should  adjustments  in 


wage  rates  be  attempted  on  the  basis  of  the  buying  value  of 
the  dollar. 

If  the  worst  comes  and,  through  the  pressure  of  com- 
petition from  abroad,  it  becomes  evident  that  with  all  other 
resources  exhausted,  general  employment  and  consequently 
general  prosperity  can  only  be  maintained  by  a  decline  in 
commodity  wage,  such  further  adjustment  must  necessarily 
follow. 

It  is  necessary  to  emphasize  that  until  all  other  expedi- 
ents are  exhausted,  the  policy  of  forcing  a  lower  standard 
of  living  by  reduction  of  the  money  wage,  while  living  costs 
are  still  approximately  at  their  peak,  or  at  any  time  to  reduce 
the  commodity  wage,  particularly  to  do  so  by  arbitrary  dis- 
charge and  rehiring  or  any  of  the  other  discredited  methods 
which  have  at  times  been  more  or  less  common,  would  be 
the  veriest  exhibition  of  not  only  injustice,  but  of  folly.  It 
would  surely  be  accompanied  by  hostility  on  the  part  of 
the  great  wage-earning  community,  as  well  as  on  'the  part 
of  the  clear-thinking  men  in  the  community  at  large;  would 
be  the  surest  way  to  increase  the  power  of  the  demagogue, 
whether  he  be  politician  or  unprincipled  labor  leader;  would 
widen  the  unfortunate  cleavage,  which  we  should  be  mend- 
ing instead  of  spreading,  between  wage-earners  and  man- 
agement; and,  at  the  present  crisis  when  the  influenza  of 
Bolshevism  is  abroad  in  the  world,  it  would  undoubtedly 
rapidly  spread  this  disease  in  our  own  country.  It  would, 
in  short,  be  bad  morals  and  bad  business. 

More  than  once  reference  has  been  made  above  to  the 
increase  in  production  which  it  is  believed  would  follow 
improved  relations  between  labor,  management  and  capital. 
This  is  a  problem  that  burdens  the  minds  of  all  sincere 
students  of  the  ideals  that  have  supported  the  world  war. 
Many  efforts  to  develop  a  new  democracy  of  industry  are 
being  made  in  England  and  serious  and  promising  ventures 
in  this  direction  are  being  launched  in  the  United  States. 
The  thread  of  gold  that  runs  through  the  fabric  of  all 
these  plans  is  the  recognition  of  the  inherent  mutuality  of 
interest  of  labor  and  management.  These  are  indispensable 
one  lo  the  other  and  must  come  to  represent  not  classes  of 
men,  but  factors  of  success  often  combined  in  a  single  indi- 
vidual. Exploitation  of  the  wage-earner  on  the  one  hand 


or  disintegration  of  management  or  capital  on  the  other, 
can  in  the  long  run  work  to  the  good  of  none  and  are 
destructive  of  production  of  goods,  which  is  the  basis  of  our 
prosperity.  Confidence  in  mutual  justice  and  fair  dealing 
between  man  and  man  is  bound  to  open  the  fountains  of 
effective  energy  in  production  as  nothing  else  can  do  to  the 
unfolding  of  the  greatest  material  and  social  prosperity  the 
world  has  known. 

Jan.  13,  1919. 


10 


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